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Early Employment Data on Tap

Daily Analysis - 08/03/2017

US ADP Nonfarm Employment Report Ahead

Official US employment figures due on Friday will be the final data point before the Federal Reserve determines whether to hike rates during its March 14-15 decision. In advance of the report, traders will receive advance indications of the state of the US jobs market when ADP releases its National Employment Report for February later in the session.

Preliminary US Labor Clues Due for Release

With market participants awaiting the preliminary jobs report from payroll processor ADP, consensus is calling for the creation of 190,000 private payrolls last month. Given that January figures were much stronger than expected at 246,000 jobs created, an outcome near the forecast looks the most likely scenario, and could further confirm the view that the economy is on solid enough footing to withstand a rate hike next week.

Other economic reports scheduled for Wednesday include January wholesale inventories and weekly mortgage applications. The U.S. Bureau of Labor Statistics will also post revised fourth quarter productivity numbers, which economists expect to marginally increase from the preliminary figure, to an annualized rate of 1.40%. After the most recent rally, US equities closed lower yesterday, with the Dow and the S&P 500 recording their first two-day drop since January.

Chinese Imports Surge Higher, Spurring Trade Gap

The latest trade figures from China showed some surprising developments overnight. Chinese exports increased 4.20% in February compared to the same period last year, while imports soared a staggering 44.70% in Yuan terms per preliminary data released earlier. The numbers come on the back of a 15.90% jump in January exports and a 25.20% growth in imports for Yuan-denominated trade. The latest import surge produced a trade deficit of CNY 60.36 billion ($8.75 billion) for the month, the first negative trade figure in three years according to the General Administration of Customs.

However, despite the headline pessimism, there is a strong possibility that the readings were skewed by the week-long Lunar New Year holidays that overlapped between January and February, shutting ports and factories. USDCNH is perched close to strong resistance around 6.910, with any break higher potentially unlocking further upside.

OECD Lifts UK Growth Forecast

The UK economy is projected to expand by 1.60% in 2017, the Organisation for Economic Co-operation and Development reported in its revised forecast. The OECD had estimated in November that current year growth would be pegged at a mere 0.40%. However, a resurgence in consumer spending combined with decisive action by the Bank of England following the “Brexit” vote has spurred economic momentum.

The OECD stuck to its forecast that GDP growth would likely decelerate to 1.00% in 2018 - a key year for “Brexit” negotiations. The intergovernmental economic body warned growth might be hit by negotiation "uncertainties" and a rising inflation, which last week hit a two-and-half-year peak of 1.80%. Despite the upgrade, GBPUSD remains in a downward trend since July of 2016, slipping below 1.2200 in early morning trade.

Japan GDP Growth Prints Below Estimates

Following notable volatility in the Yen, the Japanese economy grew at a rate that was faster than initially reported during the final quarter of 2016, helped in part by upward revisions for investment and business spending. New data from the Japanese Cabinet Office showed that the economy grew at an annualized pace of 1.20% for the three months ending December 31, up from the initial reading of 1.00%.

The revised figure however still fell well short of the consensus forecast of 1.60% expansion. The latest data further reinforces the challenges facing Japanese policymakers after repeated efforts to boost growth and spark inflation following years of stagnation. The Japanese economy has expanded the past four straight quarters, but economists warn that private consumption remains soft. After bottoming overnight following the report, EURJPY is pushing back to the upside ahead of the European open.

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